We have reached an impasse on the Peterborough bond it seems due to ongoing reshuffling of government finances. It is not clear quite how this can impact the, er, Impact bond market as a whole but clearly it is unfortunate if the programme does not have a full lifespan as originally envisaged…

The third tranche of the pilot social impact bond project working with offenders at Peterborough Prison will be replaced with an “alternative funding arrangement”, the Ministry of Justice has decided.

The nature of the new arrangement has not been confirmed, but it will not a social impact bond (SIB).

The Peterborough project works with prisoners released after short sentences to ensure they do not reoffend. The project was the first example of the SIB, a type of payment-by-results contract where investors provide a not-for-profit organisation with capital to carry out interventions. The government pays out if the interventions are successful. The investors make a profit if the project works, and lose money if it does not.

The SIB model has been ditched by the Ministry of Justice for the third tranche of the pilot project at HM Prison Peterborough

The government is replacing the payment-by-results element for the third tranche of its social impact bond pilot project at Peterborough prison with an “alternative funding arrangement”.

SIBs are financing mechanisms that seek non-government investment for social interventions. If the interventions are successful, the government commits to repaying and rewarding the investors.

The first pilot project, at HM Prison Peterborough, is provided by five charities including the St Giles Trust, and is designed to reduce repeat offending among people leaving the prison after short-term sentences.

The first two tranches of the pilot have been operated under the social impact bond model.

But a statement from the Ministry of Justice last Thursday said that keeping the payment by results element of the Peterborough scheme was not possible for the third tranche of its pilot because “the majority of prisoners within that group will already be receiving 12 months’ supervision and rehabilitation as a result of the wider reforms to probation”.

It said: “Despite this, we want to ensure the new provider of probation services in the Peterborough area has the opportunity to build the scheme into their plans.

“We have therefore proposed an alternative funding arrangement for the third pilot cohort, which will allow the scheme to continue operating until the new providers are in a position to implement their new approach to rehabilitation.”